Arranging insurance as a security, investment plan

By I. Christianto

JAKARTA (JP): More life insurance companies, particularly those partly controlled by foreign enterprises, are operating in Indonesia, proving that more people in the country are aware of the importance of having insurance.

Such an upswing in people's awareness about the importance of insurance in their lives has, therefore, created a greater market for the insurance companies, in which then aggressively launch their services to grab more market shares.

The latest data from the Indonesian Insurance Council (DAI) shows that the number of people covered by life insurance grew by 16 percent, to 22.76 million by the end of last year, compared to 19.58 million in 1998. Last year's figure for insured people represents only 10.84 percent of the nation's population of 210 million.

In the first quarter of this year, DAI reported there were 14,336,059 people insured; 79 percent of this number were under group insurance. This shows that out of a population of 210 million, 6.8 percent were covered by life insurance.

The insurance industry, however, believes the figure will surge by the end of this year, exceeding the 1999 rate. The low rate also shows that the market in Indonesia is very promising.

PT Asuransi AIA Indonesia vice president chief actuary and director of marketing, Angger P Yuwono, said that the number of new policyholders would decrease, as it had been in recent years.

"But the quality is getting better," he said.

He said the economic crisis that hit the country in 1997 had been a kind of a test case for the financial sector, including banking, leasing and insurance businesses.

The insurance sector survived as it works conservatively. Meanwhile, more people put their trust in insurance instead of saving their money in banks, he said.

He said some people had canceled their premiums held in dollars, but on the other hand, others became new holders.

"Now, people have already become accustomed to the exchange rate of the dollar against the rupiah. Furthermore, people have become more aware of the importance of insurance," he said.

Benefits

Indonesians, just like people the world over, have been known to be hesitant to take out a policy. Many consider the cost of health insurance expensive. They do not understand the benefits.

Many Indonesians want to see physical evidence of their purchases, something absent in an insurance policy. Many also still do not really comprehend the concept of insurance.

Vice President Megawati Soekarnoputri urged recently the need for a health insurance plan that gives all citizens access to health care. The new program should be sustainable and accessible for all people who seek health care, she said.

President Director of PT Zurich Life Insurance Indonesia, Ronald Cheyne, said while there was no official or formal survey, it was a fact that after the financial turmoil began to beleaguer Indonesia, more people became life and health insurance policyholders.

It is understandable that the crisis underlined people's awareness about buying health and life or some other insurance scheme. They also realize that insurance offers them benefits.

Cheyne said that Indonesia was one of the promising markets in Asia-Pacific.

He said that based on data compiled by a research agent, 31 percent of holders who already had individual life insurance wanted to own more, while 50 percent of the people without any insurance thought they needed to have some.

He said that more Indonesians had participated in signing up for life insurance for family protection and education for the children.

Scheme

Life insurance offers protection and security planning as well as investment. Several insurance companies offer attractive products to try to attract more clients.

Family protection is usually one of the major reasons for purchasing insurance. No one knows what will happen tomorrow, what ruinous act may impact on personal finance. It could be a killing disease such as a heart attack or a stroke, which could cost a family immensely.

Accidents which can hamper a person's mobility and disrupt his or her job and daily activities could also be a serious problem in gaining income.

Nobody wants a bad experience, but who can say? That is why insurers offer schemes to help people create investment and protection plans.

For instance, AIA's Life Shield offers both protection and investment in one plan.

AIA is partly owned by American International Assurance Co., which is wholly controlled by American International Group of the United States.

Life Shield also offers other benefits such as hospitalization and accident cover, including those caused by riots.

Since the depreciation of the rupiah, costs in medicine and hospitals have surged. Therefore, life and health insurance becomes a must to avoid the high expenses of health care.

AIA, the first joint-venture insurer in Indonesia, also offers Life Plus, a long-term life, flexible insurance scheme in rupiah or dollars.

Zurich, which is affiliated with Zurich Financial Services Group of Switzerland, offers several products, including Zurich Hospital Income, Zurich Investasi and Zurich Proteksi.

Cheyne said that Zurich also provides Zurich Link, a Unit Link product offering transparency. Zurich is the first insurer to introduce such a product in Indonesia.

For those seeking protection for their families, Unit Link products would be appropriate. Now, other insurers have also started offering such a scheme.

Zurich Link is a product for life protection allowing customers to set their own investment choice and determine the level of their life insurance protection. The product offers options for customers to invest in investment funds set in several currencies, including rupiah and U.S. dollars.

In selecting a good insurer in Indonesian, prospective policyholders can examine company profiles and look into the backgrounds of the owners, partners and other relevant factors.

Check the investment policy; how the insurance company reinvests the money; the claim payment schemes; the annual premium rates; and, what the companies offer. Read the offered policies and review the plan descriptions. See also the benefits of the products, such as annual bonus cash value guarantees or other value-added services.